Management Can Take Deliberate Steps to Produce a Financial Statement

question 28

Multiple Choice

Management can take deliberate steps to produce a financial statement that presents a better current ratio at the balance sheet date than the average, or normal, current ratio during the rest of the year. Analysts refer to such actions as window dressing:

• A)near the end of its accounting period a firm might delay normal purchases on account.
• B)hasten the collections of a loan receivable, classified as noncurrent assets, and use the proceeds to reduce current liabilities.
• C)near the end of its accounting period a firm might accelerate normal purchases on account.
• D)hasten the collections of a loan receivable, classified as current assets, and use the proceeds to reduce long-term liabilities.
• E)choices a and b.

Identify best responses in game theoretic models.

Determine Nash equilibria in various game settings.

Evaluate strategies for players in competitive and cooperative contexts.

Understand the impact of threats and commitments in strategic interactions.

---

Definitions:

Residual Value

The projected sale price of an asset at the termination of its operational life.

Depreciation Expense

Apportioning the expense of a concrete asset across its serviceable life.

Useful Life

The estimated period over which an asset is expected to be usable by the owner.

Straight-Line Method

A depreciation method where an asset's cost is evenly spread across its useful life, resulting in equal depreciation expenses each period.